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Let me simplify this topic briefly. I am one payment away from being in pre-foreclosure. Please, don't write to me or call me or ask me if you can help me out. I am in this predicament because I own a home (actually, our parent owns over one hundred homes) and I have a loan on it. Like everybody else in that situation, I owe my next payment. I haven't made it yet. But you can't buy from me because I am not interested in selling right now unless its at retail value. However, if I don't make that payment, then I may soon be facing foreclosure. The Pre-Foreclosure that the gurus talk about is after I don't make the payment and the bank starts hassling me. Now, the investor has a partner in convincing me to sell inexpensively - the lender. As such, pre-foreclosures are investing opportunities in that the sellers are in the category of distressed sellers. THE PITCH You are drowning in debt. You are going to lose your house to the bank. They will give you nothing. I, the investor, can save you and your house from foreclosure. The bank will take the house and kick you out, potentially keeping all of your possessions. The sale occurs on the first Tuesday of the month. Your brother, who may lend you the money to pay the bank to get you current may not come through. And who will pay when you get behind again? Let me help you. I can stop the bank. I can help you get moved/lease the house to you/save your credit/give you money and make sure the house does not get foreclosed. Help me help you. PRE-FORECLOSURE AS A STRATEGY Some investors say they work "pre-foreclosures." (See our review on Mr. Preforeclosure - a guru's materials we own.) We presume that means the following:
HoustonRealNews thinks that is a limiting strategy. It limits distressed situations to those that have someone else already coming after them. PRE-FORECLOSURE AS DEAL SOURCING However, the pre-foreclosure strategy does have one incredible advantage over other deal strategies. The third-party involvement means there is a third-party information source. You don't have to find individual deals. All you have to do is find the information source for deals. Tax suits are public information. According to one information vendor, Pre-Foreclosures are public information as well, through the 21-day advanced auction notices available through several data vendors, or through Notices of Default published on the Harris County Clerk's site (HoustonRealNews believes that this is rarely done in advance of an auction often enough to justify relying on that as an exclusive source of deals). Certainly, there are other ways of finding preforeclosures - advertising with a message and through a medium aimed at potential sellers. "Stop! Foreclosure" signs placed strategically will generate phone calls. The third parties themselves have the data but are unlikely to release it. Deal-sourcing with pre-foreclosures makes a lot of sense. Doing only pre-foreclosures only makes sense if you have as many deals as you can handle. There is a hot topic in investor circles that is a badge of honor. Working on Short Sales. Short sales are the direct result of dealing with third parties. Instead of having to close a seller, you have to close a seller and a lender, both of whom need to be incentivized to close. We consider short sales a byproduct of PreForeclosure, an advanced one, and a heavy time and energy investment. They are not recommended for first-timers without an experienced partner. If you have questions and would like more dedicated and one-on-one/small group education, we can set up live in-person or on-the-job learning sessions - upon request or at a regularly scheduled time. Related Articles -BASIC EDUCATION OVERVIEW - Basic Investing ARV - After Repair Value Birddogging Contract for Deed Dealing with Contractors Estimating Profits Evictions - A Primer Executory Contract Foreclosure Overview Foreclosure Types Overview Hard Money Loans - a/k/a Asset Based Lending* Lease Options Leverage MAO - Maximum Allowable Offer Multi-Family Investing Basics as Presented by David Lindahl on March 4, 2006 No-Money Down Real Estate Investing Options Part-Time v Full-time Passive Investing For Beginners Pre-Foreclosure Profit Calculation Remodeling for Beginners Rent vs Buy Is Really Rent vs Sell Seller Financing as Investor Buying Tool Skiptracing Subject To Wholesaling Return to Listing Return to Investor Education |
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